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Share Name | Share Symbol | Market | Type |
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Douglas Emmett Inc | NYSE:DEI | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
-0.41 | -2.97% | 13.40 | 13.82 | 13.30 | 13.82 | 1,230,922 | 01:00:00 |
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Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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Per unit price or other underlying value of transaction computed pursuant to
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Proposed maximum aggregate value of transaction:
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Total fee paid:
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(1)
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Amount Previously Paid:
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Form, Schedule or Registration Statement No.:
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Filing Party:
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Date Filed:
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1.
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To elect directors to serve on the Board of Directors until the 2018 annual meeting of stockholders.
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To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2017.
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To approve, in a non-binding advisory vote, our executive compensation.
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To express preferences, in a non-binding advisory vote, on the frequency of future stockholder advisory votes to approve executive compensation.
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To transact such other business as may properly come before our Annual Meeting or any adjournments thereof.
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By Order of the Board of Directors,
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/s/ Jordan L. Kaplan
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Jordan L. Kaplan
President and Chief Executive Officer
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PROXY STATEMENT
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TABLE OF CONTENTS
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PAGE
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Proposal 4: Non-Binding Advisory Vote on Frequency of Vote on Executive Compensation
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1.
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To elect directors to serve on the Board of Directors until the 2018 annual meeting of stockholders.
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2.
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To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2017.
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3.
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To approve, in a non-binding advisory vote, our executive compensation.
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4.
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To express preferences, in a non-binding advisory vote, on the frequency of future stockholder advisory votes to approve executive compensation.
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5.
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To transact such other business as may properly come before our Annual Meeting.
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Common stock
(1)
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Name and Address of Owner
(2)
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Number of Shares
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Percent of Class
(1)
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Jordan L. Kaplan
(3)
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10,482,598
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6.5%
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Kenneth M. Panzer
(4)
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8,028,916
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5.0%
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Dan A. Emmett
(5)
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6,325,409
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4.0%
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Christopher H. Anderson
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5,710,364
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3.6%
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Leslie E. Bider
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213,366
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*
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Thomas E. O'Hern
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83,366
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*
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Kevin A. Crummy
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71,303
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*
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William E. Simon, Jr.
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33,198
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*
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Dr. David T. Feinberg
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30,317
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*
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Mona M. Gisler
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745
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*
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Virginia A. McFerran
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3,133
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*
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The Vanguard Group, Inc.
(6)
100 Vanguard Blvd., Malvern, PA 19355
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22,179,469
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14.5%
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BlackRock, Inc.
(7)
55 East 52
nd
Street, New York, NY 10055
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15,211,727
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9.9%
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Cohen & Steers, Inc.
(8)
280 Park Avenue, 10
th
Floor, New York, NY 10017
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14,371,856
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9.4%
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FMR LLC
(9)
245 Summer Street, Boston, MA 02210
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11,879,328
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7.8%
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Vanguard Specialized Funds - Vanguard REIT Index Fund
(6)
100 Vanguard Blvd., Malvern, PA 19355 |
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10,891,347
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7.1%
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T. Rowe Price Associates, Inc.
(10)
100 E. Pratt Street, Baltimore, Maryland 21202
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9,247,655
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6.0%
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All officers, directors and nominees as a group (11 persons)
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30,982,715
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17.8%
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1.
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Pursuant to Item 403 of Regulation S-K, the number of shares listed for each individual reflects their beneficial ownership except as otherwise noted. For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares that such person or group has the right to acquire within 60 days after the Record Date. The beneficial ownership in the table includes the following share equivalents:
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Name
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OP Units
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LTIP Units
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Total
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Jordan L. Kaplan
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6,952,527
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—
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6,952,527
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Kenneth M. Panzer
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6,357,845
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—
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6,357,845
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Dan A. Emmett
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4,054,249
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—
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4,054,249
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Christopher H. Anderson
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3,415,670
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—
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3,415,670
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Kevin A. Crummy
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68,967
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—
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68,967
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Leslie E. Bider
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63,366
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—
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63,366
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Dr. David T. Feinberg
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30,317
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—
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30,317
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Thomas E. O'Hern
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29,318
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—
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29,318
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William E. Simon, Jr.
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23,198
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—
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23,198
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Mona M. Gisler
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373
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372
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745
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Virginia A. McFerran
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3,133
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—
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3,133
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All officers, directors and nominees as a group
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20,998,963
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372
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20,999,335
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2.
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Mr. Emmett is the Chairman of our Board, Mr. Kaplan is our Chief Executive Officer ("CEO") and President and a Director, Mr. Panzer is our Chief Operating Officer ("COO") and a Director, Ms. Gisler is our Chief Financial Officer ("CFO") and Mr. Crummy is our Chief Investment Officer ("CIO"). Messrs. Anderson, Bider, O'Hern, Simon and Feinberg and Ms. McFerran are members of our Board.
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3.
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Mr. Kaplan disclaims beneficial ownership of 797,481 shares of common stock owned by The Martha and Irv Kaplan Family Foundation, a California tax-exempt charitable organization. Mr. Kaplan is the sole director of the foundation, with sole voting and dispositive power over the common stock held by the foundation.
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Mr. Panzer disclaims beneficial ownership of 797,481 shares of common stock owned by The Panzer Family Foundation, a California tax-exempt charitable organization. Mr. Panzer is the sole director of the foundation, with sole voting and dispositive power over the common stock held by the foundation.
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5.
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Mr. Emmett disclaims beneficial ownership of (i) 818,408 shares of common stock owned by the Emmett Foundation, a California tax-exempt charitable organization, of which Mr. Emmett is the president with voting and dispositive power, and (ii) 66,000 shares of common stock owned by certain trusts for Mr. Emmett's children of which Mr. Emmett is a trustee, with voting and dispositive power. Mr. Emmett also disclaims beneficial ownership of the following share equivalents: 810,126 OP Units owned by trusts for Mr. Emmett's spouse and children of which Mr. Emmett is a trustee.
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6.
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Based solely on information disclosed in the Schedule 13G/A filed with the Securities and Exchange Commission ("SEC") on February 9, 2017 by The Vanguard Group (“Vanguard”) and on February 13, 2017 by Vanguard Specialized Funds - Vanguard REIT Index Fund ("Vanguard Fund"). Such reports indicates that:
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a.
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Vanguard had the (i) sole power to vote or direct to vote 266,104 shares, (ii) shared power to vote or direct to vote 165,944 shares, (iii) sole dispositive power with respect to 21,935,394 shares and (iv) shared dispositive power with respect to 244,075 shares, and
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Vanguard Fund had sole voting power with respect to 10,891,347 shares.
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7.
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Based solely on information disclosed in the Schedule 13G/A filed with the SEC on January 9, 2017 by BlackRock, Inc., which reported that it had sole voting power with respect to 14,652,512 shares and sole dispositive power with respect to all of the beneficially owned shares disclosed.
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8.
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Based solely on information disclosed in the Schedule 13G/A filed jointly with the SEC on February 14, 2017 by Cohen & Steers, Inc. (“C&S”), Cohen & Steers Capital Management, Inc. (“C&S Capital Management”), and Cohen & Steers UK Limited (“C&S UK”). C&S reported that it held a 100% interest in C&S Capital Management, an investment advisor registered under Section 203 of the Investment Advisors Act. Such report indicates that:
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a.
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C&S had (i) beneficial ownership of 14,371,856 shares, (ii) sole voting power with respect to 9,473,109 shares and (iii) sole dispositive power with respect to 14,371,856 shares,
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b.
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C&S Capital Management had (i) beneficial ownership of 14,143,289 shares, (ii) sole voting power with respect to 9,392,517 shares and (iii) sole dispositive power with respect to 14,143,289 shares, and
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c.
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C&S UK had (i) beneficial ownership of 228,567 share, (ii) sole voting power with respect to 80,592 shares and (iii) sole dispositive power with respect to 228,567 shares.
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9.
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Based solely on information disclosed in the Schedule 13G filed with the SEC on February 14, 2017 by FMR LLC, which reported that it had sole power to vote or direct to vote with respect to 5,428,643 shares and sole power to dispose or to direct the disposition of with respect to all of the beneficially owned shares disclosed.
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10.
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Based solely on information disclosed in the Schedule 13G/A filed with the SEC on February 7, 2017 by T. Rowe Price Associates, Inc., which reported that it had sole voting power with respect to 955,464 shares and sole dispositive power with respect to all of the beneficially owned shares disclosed.
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Name
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Age
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Title
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Audit Committee
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Compensation Committee
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Governance Committee
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Dan A. Emmett
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77
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Chairman of our Board of Directors
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Jordan L. Kaplan
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55
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Director, CEO and President
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Kenneth M. Panzer
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56
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Director and COO
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Christopher H. Anderson
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74
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Director
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Member
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Leslie E. Bider
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66
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Director
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Member
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Chair
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Dr. David T. Feinberg
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55
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Director
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Member
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Virginia A. McFerran
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53
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Director
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Member
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Thomas E. O'Hern
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61
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Director
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Chair
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Member
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William E. Simon, Jr.
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65
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Director
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Member
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Chair
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Strong Link Between Pay and Performance
. At the beginning of each year, our Compensation Committee approves written Operating and Financial Goals, as well as a target for our Funds From Operations ("FFO"), which we then disclose in our proxy statement. At the end of each year, our Compensation Committee determines our executives' compensation based on the achievement of those goals, our financial results (in the form of FFO) as well as our acquisitions, dispositions and development and redevelopment activities during the year and (when appropriate and disclosed) other factors.
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System Overwhelmingly Approved by our Stockholders
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We developed this system in 2012 after consultation with our stockholders, and 99% of our participating stockholders approved this revised compensation approach at the following annual meeting in 2013. Each year thereafter, we have met or talked with most of our major stockholders at least once a year, and generally more often, and engage with them on any thoughts they have on our compensation approach or implementation. We also review and consider any comments from analysts or stockholder advisory services. Taking into account stockholder preferences, since 2014 we revised our compensation system to eliminate time based restricted equity grants unrelated to performance (except in the cases such as new hires and promotions, where a grant of equity can provide an immediate appropriate stake in the Company).
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Benchmarking of Pay
. We benchmark our executive officers against a benchmark group of 13 public companies selected by our Compensation Committee with the advice of an independent compensation consultant, which includes: (i) office sector REITs that primarily invest in Class “A” space in high barrier-to-entry markets; (ii) select multi-family REITs with a strong concentration of assets in California; and (iii) select California-based REITs with whom we compete for talent. Our Benchmark Group in 2016 was the same as it was in 2015.
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Most Pay Dependent on Performance
. In 2016, the base salary of our CEO represented less than 13% of his expected annual compensation, with the remaining 87% (none of which is guaranteed) determined at the discretion of our Compensation Committee after the end of the year based on performance during the year. Our Compensation Committee believes that the equity should generally be granted at the
end
of the performance period
after
evaluating performance during the measurement period; consequently, we do not generally grant equity at the beginning of the measurement period. This also avoids the difficulty of specifying forfeiture conditions in the equity grant. In 2016, all equity grants to our CEO and COO were based on their performance; they did not receive any grants based solely on time.
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Pay Largely in Restricted Equity.
We pay most (approximately 87% for our CEO and COO in 2016) of our senior executives' compensation in the form of restricted equity based on their performance during the current year. Those grants: (i) vest over three or more years; (ii) are contingent upon the future stock price performance exceeding the price at which the restricted equity was originally granted by a minimum level set by the Compensation Committee (two percent for 2016 grants); (iii) are subject to restrictions on transfer for two years after vesting; (iv) and any grants not converted into common stock within 10 years of the grant date will be forfeited. Accordingly, none of the equity granted to our executive officers is restricted for less than four years, and some is restricted for at least seven years, after grant. This directly ties the value of the compensation for our executive officers not only to our evaluation of their performance in the year of grant, but also to the ultimate total return to our stockholders over a multi-year period.
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Significant Long-Term Equity Ownership Creates a Strong Tie to Our Stockholders.
On March 31, 2017 our executive officers and directors held approximately 19% of our outstanding share equivalents (common stock, OP Units and LTIP Units), with a market value of $1.3 billion based on the closing price of our stock on March 31, 2017. Each of our executive officers and directors is in compliance with our share ownership and retention policy (described below in “Corporate Governance-Equity Ownership Guidelines”).
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Reasonable and Limited Perquisites
. We provide very limited perquisites for our executive officers. Our executive officers are entitled to a car or car allowance in lieu of mileage reimbursement and participate in our employee plans on the same basis as our other employees, including vacation, medical and health benefits and our 401(k) retirement savings plan. Our CEO and COO are also entitled to use their secretaries for personal matters, which we believe is minimal and can increase the efficiency of their efforts for us. We believe these perquisites, while not representing a significant portion of our executive officers' total compensation, reflect our intent to create overall market comparable compensation packages.
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Reasonable Employment Provisions.
The employment agreements for our executive officers do not contain (i) any "single trigger" change of control provisions in any employment provisions; (ii) any severance multipliers in excess of three times; or (iii) any excise tax gross-ups. They do include a provision requiring repayment of any overpayment of compensation following a restatement of our financial statements. We also prohibit hedging transactions in, and pledging of, our securities by our executive officers and directors (without the specific approval of our Audit Committee, which did not grant any such approvals in 2016).
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Strong Fundamentals
. During 2016, we increased net effective office rents throughout our office portfolio, and we maintained high levels of occupancy in our office portfolio despite acquiring several properties with significant vacancy, ending the year at 92.2% leased and 90.4% occupied. Based on external estimates, the leased rate of our office portfolio at December 31, 2016 exceeded the average Class A office leased rate in our submarkets by over 160 basis points, a strong achievement because we represent more than a quarter of those markets. The average straight-line rental rate for new and renewed leases that we signed during 2016 was 27.4% greater than the average straight-line rental rate on the expiring leases for the same space. Our multifamily portfolio remained fully leased while we raised asking rents by an average of 5.1%.
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Excellent G&A Control
. In 2016, our general and administrative expenses represented 4.7% of our revenues, significantly less than the average of 7.3% for a benchmark group of Central Business District (CBD) office REITs.
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Excellent Capital Control
. In 2016, our recurring capital expenditures, tenant improvements and leasing commissions represented 8.7% of our revenues, significantly less than the average of 14.1% for a benchmark group of CBD office REITs
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Excellent Tenant Service
. Tenant service is key in handling our very large number of small, affluent tenants. In our annual survey of all of our tenants (to which over 1,400 tenants responded), our overall tenant satisfaction score increased to a record high of 4.53 out of 5.
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Strong Sustainability Program
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During 2016, we saved over $3.7 million by reducing same property electricity usage by 4% and electrical costs by over 9%. At year end, over 90% of our eligible office space was ENERGY STAR certified by the United States Environmental Protection Agency (the “EPA”), with energy efficiency in the top 25% of buildings nationwide.
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Strong FFO Growth
. For 2016, we achieved $1.81 in FFO per share, an increase of 11% from 2015, and above the target of $1.74 per share set by our Compensation Committee at the beginning of the year. Excluding $6.6 million of accelerated non-cash accretion of an above-market ground lease from the acquisition of the Harbor Court Land in 2015, our FFO per share increased by 13.8% from 2015.
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Strong Same Property NOI Growth.
For 2016, our same property cash net operating income (NOI) increased by 5.6% compared to 2015, reflecting increasing rental rates and excellent cost control.
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Significant Acquisitions and Dispositions
. Our Compensation Committee determined that the acquisitions and disposition that we completed in 2016 were well negotiated and executed. During 2016, together with our joint venture partners, we acquired approximately $1.7 billion of Class A office properties in our core Los Angeles submarkets.
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Progress with Developments.
We continued to make progress with our two multifamily developments, one in our Brentwood submarket in Los Angeles, California, and the other in Honolulu, Hawaii. The Brentwood development made significant progress through the entitlement process and we commenced construction of units at our Moanalua development in Honolulu, with expected delivery of the first phase of units in late 2017.
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Financing our Growth
. We raised equity capital of approximately $750 million from our joint venture partners to finance the acquisition of Class A office properties during 2016 (see "Acquisitions and Dispositions" above), and we closed over $1.7 billion of new loans in 2016, including $726 million of new loans to fund our joint venture property acquisitions and approximately $1 billion of new loans related to refinancings. Of the loans that we closed, over 90% were fixed or effectively fixed with interest rate swaps at a weighted average annual effective interest rate of 2.8%.
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Excellent Long Term Total Shareholder Return
. Although our Compensation Committee does not formally consider our total shareholder return ("TSR") for the reasons discussed below, our independent compensation consultant provided data on it for our Compensation Committee. In 2016, our one year TSR (20.3%) put us in the 73rd percentile of our Benchmark Group. Over the longer term, our performance has been even stronger: our TSR for the last seven years and for the ten years since our IPO were at the 89th and 88th percentile of our Benchmark Group, respectively.
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Name
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Age
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Title
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Dan A. Emmett
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77
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Chairman of the Board of Directors
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Jordan L. Kaplan
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55
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CEO and President
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Kenneth M. Panzer
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56
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COO
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Kevin A. Crummy
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51
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CIO
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Mona M. Gisler
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43
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CFO
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Title
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Share Equivalents
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Multiple of Salary/retainer
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CEO
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200,000
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4x
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Other executive officers
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50,000
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3x
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Directors
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10,000
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3x
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•
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Pay for Performance
: We believe in paying our executive officers based on their performance (so-called “pay for performance”). Accordingly, performance-based pay represents a substantial majority of the compensation of our executive officers. Only about 10 to 15% of our CEO and COO's compensation is guaranteed, with the remainder determined at the end of each year based upon performance during the year. To avoid excessive focus on any one element, as discussed below, our Compensation Committee considers a variety of specified factors in determining the specific level of compensation that we provide to our CEO, COO and our other executive officers.
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Alignment with Long Term Stockholder Value
: We believe that our executive compensation should align incentive compensation opportunities with the long-term interests of our stockholders. Approximately 87% of our CEO and COO's compensation in 2016 was in the form of restricted equity whose transfer is restricted for between four and seven years after grant, which further aligns their interests with those of our stockholders.
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Competitiveness
: Our Compensation Committee seeks to pay competitive compensation that allows us to attract and retain talented and experienced executives. To do this, we benchmark our CEO and COO's compensation against a group of competitive companies. We also pay most of the compensation to our senior executives in restricted equity that vests over three years, and whose transfer is restricted for four to seven years, which encourages our executives to stay with us.
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Alignment of Risk Profile
: We seek to structure compensation to discourage excessive risk-taking and to encourage ethical and social responsibility. To avoid situations where management focuses on the selected metrics to the detriment of real performance or where a mechanical formula produces anomalous results, our Compensation Committee does not use such formulas to measure success. This approach, together with our benchmarking approach, also eliminates the chance that a formula produces uncapped excessive compensation, and allows our Compensation Committee to factor into its compensation decisions its analysis of the risks taken to achieve the results. We also reduce the potential for excessive risk taking by paying more than 85% of our CEO and COO's annual compensation in restricted equity whose transfer is restricted for between four and seven years after grant, by requiring that equity to be forfeited if performance criteria are not met (generally requiring a capital event such as a material stock sale at a price at least 2% higher than on the date of grant), by imposing a clawback of compensation in the event of a restatement and by having our directors and executive officers maintain significant stock ownership.
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Salary:
We establish salary levels for our executive officers annually (as well as upon any promotion or other change in job responsibilities) as part of their total compensation package based on matters including (i) the responsibilities of the position, (ii) the individual's salary history, performance and perceived ability to influence our financial performance in the short and long-term, (iii) the compensation of our other employees, and (iv) an evaluation of salaries for similar positions in our Benchmark Group and other competitive factors. We believe that base salary should represent a modest portion of the compensation for our executive officers; our CEO's and COO's base salaries constituted less than 15% of their expected annual compensation. In addition, our Compensation Committee has generally not increased base salaries for our executive officers, believing that any increases in compensation should be based on performance; the 2016 base salaries for our executive officers other than Mr. Emmett are the same as they were in 2008 (or when they joined the Company or were promoted to their current position, if later). For information concerning base salaries of each of our executive officers during 2016, see “Summary Compensation Tables” below.
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•
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Annual Incentive Compensation:
We pay most of the annual compensation for our executive officers in the form of discretionary compensation, none of which is guaranteed. We have also paid a significant portion of the annual bonuses of our senior employees in the form of equity that vests over three years and is contingent upon our future stock price exceeding the grant price by a minimum level set by the compensation committee (two percent for 2016 grants), and we restrict our executives from transferring that equity for between four and seven years after grant, and any grants not converted into common stock within 10 years of the grant date will be forfeited. This better aligns the interests of our executives with our stockholders, makes their compensation dependent on future performance and functions as “golden handcuffs.” For information concerning annual incentive compensation of each of our executive officers during 2016, see “Summary Compensation Tables” below.
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•
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Perquisites and Other Personal Benefits:
We provide very limited perquisites for our executive officers. Our executive officers are entitled to a car or car allowance in lieu of mileage reimbursement and participate in our employee plans on the same basis as our other employees, including vacation, medical and health benefits and our 401(k) retirement savings plan. Messrs. Emmett, Kaplan and Panzer are also entitled to use their secretaries for personal matters, which we believe is minimal and can increase the efficiency of their efforts for us. These benefits are considered by our Compensation Committee in its review of compensation for our executive officers. We believe these perquisites, while not representing a significant portion of our executive officers' total compensation, reflect our intent to create overall market comparable compensation packages. For information concerning the perquisites of each of our executive officers during 2016, see “Summary Compensation Tables” below.
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•
|
Operating and Financial Goals:
Our Compensation Committee evaluates whether our management achieved the specific operating and financial goals set by our Compensation Committee at the beginning of the year and disclosed in our Proxy Statement. Our Compensation Committee seeks to set goals for matters within the control of our management, and which it believes are the key factors in the year related to both our annual and long-term success.
|
•
|
External Business Activities:
Our Compensation Committee evaluates our
external business activities during the year, which includes the effectiveness and financial results of acquisitions, dispositions and development and redevelopment activities. Our Compensation Committee does not set any numeric targets for these activities, since the best course of action necessarily depends on market developments, including the availability and pricing of opportunities, during the year. Our Compensation Committee believes it is equally important that we avoid bad acquisitions as it is that we make good acquisitions.
|
•
|
FFO Targets:
Our Compensation Committee evaluates whether our management achieved the quantitative FFO
(1)
targets
set at the beginning of the year. We use FFO as a performance yardstick because many of our investors use it to compare our operating performance with that of other Real Estate Investment Trusts ("REITs").
In evaluating management's performance, our Compensation Committee looks at the “quality” of our FFO as well as its absolute amount. Increases in leasing fundamentals, for example, may (or may not) reflect better management performance than increases that are solely attributable to acquisitions. Our FFO targets, which are set at the beginning of the year, typically exclude the effect of factors such as future acquisitions, dispositions, equity issuances and repurchases, debt financings and repayments, recapitalizations and similar matters, but our Compensation Committee considers such matters in evaluating our management's performance.
|
•
|
Other Factors:
Our Compensation Committee also reserves the right to take into account additional factors beyond those identified at the beginning of the year.
|
|
As of November 15, 2016
|
As of December 31, 2016
|
||
Performance Period
|
Our
Total Shareholder Return ("TSR")
|
Benchmark Group
Ranking |
Our
Total Shareholder Return ("TSR")
|
Benchmark Group
Ranking |
One year
|
13.1%
|
74th percentile
|
20.3%
|
73rd percentile
|
3-Year
|
60.5%
|
73rd percentile
|
70.9%
|
67th percentile
|
5-Year
|
117.2%
|
91st percentile
|
131.2%
|
87th percentile
|
Since IPO
|
122.3%
|
88th percentile
|
136.6%
|
88th percentile
|
Area
|
2017 Goals
|
Leasing
|
Achieve a leased rate in our office portfolio that exceeds the average for Class A office buildings in our submarkets.
|
Increase rents in our office portfolio.
|
|
Increase rents in our multi-family portfolio.
|
|
Operations
|
Institute additional upgraded information technology systems.
|
Continue to implement additional practices and equipment to improve energy usage.
|
|
Leverage relationships with strategic vendors to maintain high levels of service and efficiency.
|
|
Maintain high levels of tenant satisfaction.
|
|
Limit our general and administrative expenses to a percentage of revenue in the lower half of comparable REITs.
|
|
Capital
|
Substantially complete Phase I of the construction of the Moanalua Apartment project expansion.
|
Complete the entitlement process for The Landmark apartment high rise and make substantial progress on the design and engineering required to allow the start of construction.
|
|
Continue to address upcoming debt maturities and refinance the loan for one of our unconsolidated Funds.
|
•
|
We align the interests of our executives with those of our stockholders by paying a significant portion of the compensation of our executive officers in equity (for example, approximately 87% for our CEO and COO in 2016), in addition, as of March 31, 2017, our directors and executive officers owned approximately 19% of our outstanding share equivalents (common stock, OP Units and LTIP Units), with a market value of $1.3 billion, based on the closing price of our stock on March 31, 2017, well in excess of what is required by our stock ownership guidelines.
|
•
|
We tie our executives' compensation to the long-term impact of their decisions by paying most or all of their annual incentive compensation in restricted equity whose transfer is restricted for not less than four, and as much as seven, years after grant.
|
•
|
By awarding LTIP Units, rather than options or outperformance plans, we reduce the potential that outsized rewards and limited downside will induce excessive risk taking.
|
•
|
We avoid potential anomalies from relying on mechanical formulas, including distortion by unanticipated events, uncapped excessive compensation and undue focus on the metrics chosen. Our Compensation Committee also factors into its compensation decisions the risk taken to achieve the results achieved.
|
•
|
Our clawback/recoupment policy reduces the chance that our executive officers benefit if earnings were misstated.
|
•
|
We prohibit hedging of our stock by our executive officers and also prohibit them from pledging any of our stock they own without the specific approval of our Audit Committee. No such permission was granted during 2016, and as of March 31, 2017, none of the shares of stock owned by our executive officers was subject to any pledge.
|
•
|
Incentive Stock Options or Non-Qualified Stock Options
. Options entitle the participant to purchase shares of our common stock over time for an exercise price fixed on the date of the grant. The exercise price may not be less than 100% of the fair market value of our common stock on the date of the grant. The exercise price may be paid in cash, by the transfer of shares of our common stock meeting certain criteria, by the sale through a broker of a portion of the shares acquired upon exercise, by applying the value of a portion of the shares acquired upon exercise and issuing only the net balance of the shares, or by a combination of these methods. The participant has no rights as a stockholder with respect to any shares covered by the option until the option is exercised by the participant and shares are issued by us. Although we expect to grant only non-qualified stock options, our 2016 Plan permits the grant of options that qualify as an “incentive stock option” under the Internal Revenue Code.
|
•
|
Stock Appreciation Rights
. SARs entitle the participant to receive the appreciation in the fair market value of our common stock between the date of grant and the exercise date either in cash or in the form of shares of our common stock. For cash-settled SARs, the participant will have no rights as a stockholder. For stock-settled SARs, the participant will have no rights as a stockholder with respect to any shares covered by the SAR until the award is exercised by the participant and we issue the shares. SARs may be granted either in tandem with stock options or independently. SARs granted in tandem with options may be exercised only during the time that the related options may be exercised, and the number of SARs is decreased by the number of options exercised by the participant.
|
•
|
Restricted Stock and Deferred Stock Awards
. Restricted stock awards are shares of our common stock that vest in accordance with terms and conditions established by the Compensation Committee. Deferred stock awards are stock units entitling the participant to receive shares of our common stock paid out on a deferred basis. Shares of restricted stock or deferred stock awards that do not satisfy applicable vesting conditions are subject to our right of repurchase or forfeiture. In either case, the vesting conditions may be based on continued employment (or other service) with us and our affiliates and/or achievement of performance goals. Unless otherwise provided in the applicable award agreement, a participant granted restricted stock will have the rights of a stockholder for the common stock subject to restrictions, including voting and dividend rights, but not the right to sell or transfer the shares. A participant granted a deferred stock award does not have stockholder rights until shares are issued, if at all.
|
•
|
Other Stock-based Awards
. Other stock-based awards permitted under our 2016 Plan include awards that are valued in whole or in part by reference to shares of our common stock, including convertible preferred stock, convertible debentures and other convertible or exchangeable securities, partnership interests in a subsidiary or our operating partnership, awards valued by reference to book value, fair value or performance of a subsidiary, and any class of profits interest or limited liability company membership interest.
|
•
|
Dividend Equivalent Rights
. Dividend Equivalent Rights entitle the participant to receive credits for dividends that would be paid if the participant had held specified shares of our common stock. Dividend equivalent rights may not be granted on option shares or SARs.
|
•
|
LTIP Units.
LTIP Units are a separate series of units of limited partnership interests in our operating partnership valued by reference to the value of our common stock. LTIP Units, whether vested or unvested, entitle the participant to receive, currently or on a deferred or contingent basis, dividends or dividend equivalent payments with respect to the number of shares of our common stock underlying the LTIP Unit Award or other distributions from our operating partnership. LTIP Unit Awards that do not satisfy applicable vesting conditions are subject to our right of repurchase or forfeiture. LTIP Units are structured as “profits interests” for federal income tax purposes, and we do not expect the grant, vesting or conversion of LTIP Units to produce a tax deduction for us. As profits interests, LTIP Units initially will not have full parity with OP Units with respect to liquidating distributions. Upon the occurrence of specified events, LTIP Units can achieve full parity with OP Units with respect to liquidating distributions. If full parity is achieved, LTIP Units may be converted, subject to the satisfaction of applicable vesting conditions, on a one-for-one basis into OP Units, which in turn are redeemable by the holder for shares of our common stock or for the cash value of such shares, at our election. Until full parity is reached, the value that a participant could realize for a given number of LTIP Units will be less than the value of an equal number of shares of our common stock and may be zero.
|
•
|
Compensation
:
Each of Messrs. Kaplan and Panzer is entitled to receive a salary of not less than $1,000,000, and Mr. Crummy is entitled to receive a salary of not less than $600,000. Messrs. Kaplan, Panzer and Crummy are also entitled to receive an annual bonus based on their individual performance and our overall performance during the year, as evaluated by our Compensation Committee in consultation with that officer. Following a change of control, the total of each officer's salary and bonus may not be less than the total salary and bonus paid with respect to the calendar year ending before the change in control.
|
•
|
Perquisites and Other Benefits
: Messrs. Kaplan and Panzer are entitled to the use of an automobile and family health insurance, and to use their secretaries for personal use to an extent reasonably consistent with past practices. Mr. Crummy is entitled to a car allowance. Each of these executives is entitled to 25 days of personal time off per year. Otherwise, the agreements do not provide our executive officers with perquisites that differ from those of our other employees.
|
•
|
Term
: The term of each employment agreement ends December 31, 2018, subject to earlier termination with or without cause (30-days' prior notice is required where the termination is by us without cause or by the officer for good reason).
|
•
|
Severance Payments
: If we terminate an officer's employment without cause, or if the officer terminates his employment for good reason, they will receive severance equal to (a) compensation equal to three times the average of their total compensation over the last three calendar years ending prior to the termination date (two times for Mr. Crummy), including (i) their salary, (ii) their annual bonus and (iii) the value of any other awards under our plans (the value of LTIP Units will be the face value of the award on the date of grant) (except that in the case of long term grants, where it will be based on the amount that vested in the year - this provision does not apply to Messrs. Kaplan or Panzer, who did not receive any long term grants), and (b) continued coverage under our medical and dental plans for the officer and their eligible dependents for a three-year period (two-year period for Mr. Crummy) following their termination. See “
Potential Payments Upon Termination or Change of Control
” below. Mr. Crummy's agreement contains a means of calculating his average total compensation until he has three full calendar years of service.
|
•
|
Other Termination Payments
: Upon an officer's death or disability, they will continue to receive medical benefits for themselves (in the case of disability only) and their eligible dependents for a period of twelve months plus vesting of any unvested equity grants through the end of the year of termination in lieu of any severance or annual bonus.
|
•
|
Non-competition
: Each of these employment agreements also contains a non-competition provision that applies during the term of the agreement, and under which the officer covenants that they will not: (i) for their own account engage in any business that invests in or deals with large and mid-size office buildings and multifamily properties in Los Angeles County and Hawaii (larger than 50,000 square feet for office properties and 50 units for apartment buildings); (ii) enter the employment of, or render any consulting or any other services to, any such entities that so compete, directly or indirectly, with any business carried on by us or any of our subsidiaries; or (iii) become interested in any such competing entity in any capacity, including, without limitation, as an individual, partner, shareholder, officer, director, principal, agent, trustee or consultant; provided, however, that the officer may own, directly or indirectly, solely as a passive investment, 5% or less of any class of securities of any entity traded on any national securities exchange and any assets acquired in compliance with the requirements of the aforementioned non-competition provisions.
|
Name & Principal Position
|
|
Year
|
|
Total Compensation Per Table Above
|
|
Adjustment To Move Equity Grants From Year Granted To Year Vested
|
|
Adjusted Total Compensation
|
||||||
|
|
|
|
|
|
|
|
|
||||||
Jordan L. Kaplan
(6)
|
|
2016
|
|
$
|
7,916,869
|
|
|
$
|
—
|
|
|
$
|
7,916,869
|
|
President and CEO
|
|
2015
|
|
$
|
7,541,457
|
|
|
$
|
—
|
|
|
$
|
7,541,457
|
|
|
|
2014
|
|
$
|
6,402,493
|
|
|
$
|
975,000
|
|
|
$
|
7,377,493
|
|
|
|
|
|
|
|
|
|
|
||||||
Kenneth M. Panzer
(6)
|
|
2016
|
|
$
|
7,908,058
|
|
|
$
|
—
|
|
|
$
|
7,908,058
|
|
COO
|
|
2015
|
|
$
|
7,533,516
|
|
|
$
|
—
|
|
|
$
|
7,533,516
|
|
|
|
2014
|
|
$
|
6,394,122
|
|
|
$
|
975,000
|
|
|
$
|
7,369,122
|
|
|
|
|
|
|
|
|
|
|
||||||
Kevin A. Crummy
(4)
|
|
2016
|
|
$
|
2,377,018
|
|
|
$
|
650,000
|
|
|
$
|
3,027,018
|
|
CIO
|
|
2015
|
|
$
|
1,618,157
|
|
|
$
|
650,000
|
|
|
$
|
2,268,157
|
|
|
|
2014
|
|
$
|
4,398,740
|
|
|
$
|
(2,600,000
|
)
|
|
$
|
1,798,740
|
|
|
|
|
|
|
|
|
|
|
||||||
Mona M. Gisler
(5)
|
|
2016
|
|
$
|
619,009
|
|
|
$
|
130,000
|
|
|
$
|
749,009
|
|
CFO
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
(1)
|
Represents the salary payable with respect to the year it was earned.
|
(2)
|
Represents the aggregate grant date fair value of restricted equity grants, calculated in accordance with ASC 718, not the face value, under the assumptions set forth in Note 12 to our audited financial statements for 2016 included in our 2016 Annual Report on Form 10-K. We restricted our executives from selling or transferring their LTIP Unit Awards in 2016 for between four and seven years after grant. All of our LTIP Unit grants in 2016 were performance based, with the amount granted reflecting the Compensation Committee's evaluation of the performance of the officer during the year in which they were granted. As noted above, our Compensation Committee believes that the equity should generally be granted at the
end
of the measurement period
after
evaluating performance rather than at the beginning of the measurement period subject to potential forfeiture for non-performance.
|
(3)
|
The 2016 amount presented includes (to the extent applicable) auto allowances (in lieu of mileage reimbursements), matching contributions under our 401(k) Plan and the estimated incremental cost of personal use of an administrative assistant. For details, see “Employment Agreements”. Messrs. Kaplan and Panzer received an auto allowance of $30,454 and $28,643 during 2016, respectively, $30,115 and $29,174 during 2015, respectively, and $30,411 and $29,040 during 2014, respectively.
|
(4)
|
Mr. Crummy joined us in July 2014, and his compensation for 2014 included several one-time matters in connection with his hiring, including an agreement that his bonus for 2014 would not be prorated, and a sign-on bonus consisting of a long-term restricted equity grant with an aggregate fair value of $2,600,000, vesting one quarter ($650,000) at the end of each of 2015, 2016, 2017 and 2018.
|
(5)
|
Ms. Gisler received a long-term restricted equity grant in December 2015 in connection with her promotion to CFO effective January 1, 2016. The grant had an aggregate fair value of $650,000, vesting one fifth ($130,000) at the end of each of 2016, 2017, 2018, 2019 and 2020.
|
(6)
|
In 2010, as part of our compensation approach at that time, Messrs. Kaplan and Panzer each received long-term restricted equity grants in 2010 with an aggregate fair value of $3,900,000, vesting one quarter ($975,000) at the end of each of 2011, 2012, 2013 and 2014.
|
Name
|
|
Approval Date
(1)
|
|
Grant Date
(1)
|
|
Number of LTIP Units Awarded
(1)
|
|
Grant Date
Fair Value of
LTIP Unit Award
(1)(2)
|
||
|
|
|
|
|
|
|
|
|
||
Dan A. Emmett
|
|
November 21, 2016
|
|
December 9, 2016
|
|
3,256
|
|
$
|
87,521
|
|
Jordan L. Kaplan
|
|
November 21, 2016
|
|
December 9, 2016
|
|
255,819
|
|
$
|
6,876,415
|
|
Kenneth M. Panzer
|
|
November 21, 2016
|
|
December 9, 2016
|
|
255,819
|
|
$
|
6,876,415
|
|
Kevin A. Crummy
|
|
November 21, 2016
|
|
December 9, 2016
|
|
55,209
|
|
$
|
1,484,018
|
|
Mona M. Gisler
|
|
November 21, 2016
|
|
December 9, 2016
|
|
7,292
|
|
$
|
196,009
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Consistent with our annual practice, our Compensation Committee approved the dollar value of the grants on November 21, 2016, stipulating that they be granted on December 9, 2016, with the number of LTIP units to be based on the closing price of our common stock on the date of grant ($38.40 at December 9, 2016). Our Compensation Committee does so because we wish to inform our employees of the grants in their reviews, which are scheduled to occur between the approval date and the grant date.
|
(2)
|
The amounts represent the aggregate grant date fair value of the LTIP Units calculated in accordance with ASC 718, under the assumptions set forth in Note 12 to our audited financial statements for 2016 included in our 2016 Annual Report on Form 10-K.
|
|
Option Awards
|
|
Unvested LTIP Unit Awards
|
|||||||||
Name
|
Number of Underlying Securities (Shares of Common Stock)
|
|
Exercise
Price
|
|
Expiration
Date
|
|
Number of Unvested LTIP Units
(1)
|
|
Market Value of Unvested LTIP Units
(2)
|
|||
|
|
|
|
|
|
|
|
|
|
|||
Dan A. Emmett
|
54,348
|
|
|
$11.42
|
|
12/31/2018
|
|
5,611
|
|
$
|
205,139
|
|
|
15,773
|
|
|
$15.05
|
|
12/31/2019
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|||
Jordan L. Kaplan
|
1,358,696
|
|
|
$11.42
|
|
12/31/2018
|
|
267,607
|
|
$
|
9,783,712
|
|
|
525,763
|
|
|
$15.05
|
|
12/31/2019
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|||
Kenneth M. Panzer
|
1,358,696
|
|
|
$11.42
|
|
12/31/2018
|
|
267,607
|
|
$
|
9,783,712
|
|
|
525,763
|
|
|
$15.05
|
|
12/31/2019
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|||
Kevin A. Crummy
|
—
|
|
|
$—
|
|
—
|
|
139,372
|
|
$
|
5,095,440
|
|
|
|
|
|
|
|
|
|
|
|
|||
Mona M. Gisler
|
—
|
|
|
$—
|
|
—
|
|
33,950
|
|
$
|
1,241,212
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Unvested LTIP Units vest as follows:
|
(2)
|
Based on the closing price of our common stock of $36.56 on December 31, 2016 at the rate of one share of our Common Stock for each LTIP Unit.
|
|
Option Awards
|
|
LTIP Unit Awards
|
|||||||||
Name
|
Number of Shares Acquired on Exercise
|
|
Value Realized on Exercise
(1)
|
|
Number of LTIP Units Vested
|
|
Value Realized on Vesting
(2)
|
|||||
|
|
|
|
|
|
|
|
|||||
Dan A. Emmett
|
204,234
|
|
$
|
2,793,370
|
|
|
4,334
|
|
$
|
158,451
|
|
|
Jordan L. Kaplan
|
3,547,091
|
|
$
|
47,993,749
|
|
|
252,941
|
|
$
|
9,247,523
|
|
|
Kenneth M. Panzer
|
3,547,091
|
|
$
|
47,993,749
|
|
|
252,941
|
|
$
|
9,247,523
|
|
|
Kevin A. Crummy
|
—
|
|
|
$
|
—
|
|
|
65,012
|
|
$
|
2,376,839
|
|
Mona M. Gisler
|
—
|
|
|
$
|
—
|
|
|
9,499
|
|
$
|
347,283
|
|
|
|
|
|
|
|
|
|
(1)
|
Amounts are determined by multiplying (i) the number of shares of our common stock to which the exercise of the options related, by (ii) the difference between the per-share closing price of our common stock on the date of exercise and the exercise price of the options.
|
(2)
|
Amounts represent the market value as of the vesting date of the awards, based on the closing price for our common stock on the date of vesting of the LTIP Units, at the rate of one share of our Common Stock for each LTIP Unit.
|
Equity compensation plans
approved by security holders
(1)
:
|
Number of securities to be issued upon exercise of outstanding options, warrants and rights
|
Weighted-average exercise price of outstanding options, warrants and rights
|
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the first column)
|
2006 Plan
(2)
|
3,969
|
$12.43
|
—
|
2016 Plan
|
—
|
$—
|
6,934
|
Total
|
3,969
|
|
6,934
|
(1)
|
We do not have any equity compensation plans which were not approved by our security holders.
|
(2)
|
No further awards may be granted under our 2006 Plan, although awards granted under the 2006 Plan in the past and which are still outstanding will continue to be governed by the terms of our 2006 Plan.
|
(3)
|
For more information about our 2016 Plan and our 2006 Plan, please see "Principal Compensation Agreements and Plans".
|
•
|
any unpaid salary from the date of the last payroll to the date of termination;
|
•
|
reimbursement for any properly incurred unreimbursed business expenses; and
|
•
|
unpaid, accrued and unused personal time off through the date of termination.
|
•
|
any existing rights to indemnification for prior acts through the date of termination; and
|
•
|
any options and LTIP Units awarded pursuant to our 2016 Plan and our 2006 Plan to the extent provided in that plan and the grant or award.
|
Name
(1)
|
LTIP Unit Awards
(2)
|
||
|
|
||
Christopher Anderson
|
$
|
149,641
|
|
Leslie E. Bider
|
$
|
162,121
|
|
Dr. David T. Feinberg
|
$
|
287,312
|
|
Virginia A. McFerran
|
$
|
149,641
|
|
Thomas E. O'Hern
|
$
|
168,348
|
|
William E. Simon, Jr.
|
$
|
162,121
|
|
|
|
(1)
|
Our directors who are also our employees are not entitled to receive additional compensation for their services as directors, and thus Messrs. Emmett, Kaplan and Panzer are not included in this table. The compensation received by Messrs. Emmett, Kaplan and Panzer as our employees is shown in the "Summary Compensation Tables".
|
(2)
|
The amounts in this column represent the grant date fair value, not the face value, of awards made in 2016. The grant date fair value is calculated in accordance with ASC 718, based on the assumptions disclosed in Note 12 to our audited financial statements for 2016, which are included in our 2016 Annual Report on Form 10-K. Except in the case of Dr. Feinberg, who received a pro-rata annual retainer grant with a fair value of $137,671 for his 2016 services upon his reelection to the Board in 2016, these awards were granted on December 9, 2016 for 2017 services. Our non-employee directors did not hold any options as of December 31, 2016.
|
|
Fees
(1)
|
|
2016
|
|
2015
|
|
||||
|
|
|
|
|
|
|
||||
|
Audit Fees
|
|
$
|
1,000,000
|
|
|
$
|
976,199
|
|
|
|
Audit Related Fees
(2)
|
|
42,000
|
|
|
2,000
|
|
|
||
|
Tax Fees
(3)
|
|
754,756
|
|
|
660,000
|
|
|
||
|
All Other Fees
|
|
—
|
|
|
—
|
|
|
||
|
|
|
|
|
|
|
||||
|
Total
|
|
$
|
1,796,756
|
|
|
$
|
1,638,199
|
|
|
|
|
|
|
|
|
|
(1)
|
This table reflects fees for services related to Douglas Emmett, Inc. and its consolidated subsidiaries, but does not reflect fees for services related to our joint ventures and our funds.
|
(2)
|
2016 includes $40,000 for an audit to comply with SEC Regulation S-X Rule 3-14 and $2,000 for access to an accounting research database, and 2015 includes $2,000 for access to an accounting research database
|
(3)
|
Tax Fees include fees for assistance with tax compliance matters.
|
1 Year Douglas Emmett Chart |
1 Month Douglas Emmett Chart |
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